Consumer sentiment declines in January

RuthMantell

WASHINGTON (MarketWatch) — A gauge of consumer sentiment declines in January, with grimmer views on current and upcoming economic conditions, according to data released Friday.

The consumer-sentiment gauge hit a final reading of 81.2 in January, down from a final December level of 82.5, according to the University of Michigan and Thomson Reuters. A preliminary estimate for January was 80.4.

“Optimism about long-term job and income prospects are essential for maintaining high levels of economic motivation,” sad Richard Curtin, chief economist for the survey.

Economists watch sentiment levels to get a feeling for the direction of consumer spending, which is the backbone of the economy. In December, consumer spending rose a seasonally adjusted 0.4%, above analysts’ expectations of a 0.2% gain, according to separate data released Friday.

“We expect real consumer spending to grow at a faster pace in 2014 than in 2013, since the housing market, job prospects, and consumer confidence are expected to make further gains in the New Year,” Chris Christopher Jr., consumer economics director at IHS Global Insight, wrote in a research note.

Details of the UMich report show that a gauge of consumers’ views on current economic conditions fell to 96.8 in January from 98.6 in December. Meanwhile, the barometer of consumers’ expectations declined to 71.2 from 72.1. A separate report on confidence, released earlier this week, showed that consumers perked up in January.

A wide variety of factors can impact consumers’ attitudes. The most recent jobs report, which showed weak employment growth at the end of 2013, won’t help consumers feel perkier. But rising home and stock prices are likely to boost their spirits.

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